Some defensive stocks such as railway shares and food companies also attracted buyers, with East Japan Railway Co rising 2.1 per cent and Ajinomoto Co advancing 1.9 per cent.

But concern about the strength of China's economy put machinery makers under pressure. China reported on Monday that its economic growth slowed in the second quarter and that factory output growth in June weakened to a two-year low, a worrying sign for investment and exporters as a trade war with the United States intensifies.

Yaskawa Electric tumbled 7.3 per cent and Okuma Corp and Fanuc both fell 4.1 per cent.

"The Nikkei may hit the 23,000-mark (soon) as the weak yen is lifting the mood, but the market is not supported by strong energy, it's just momentum," said Hikaru Sato, a senior technical analyst at Daiwa Securities, adding investors are cautious about the risk of a slowdown in demand from China in the mid-to-long term.

Nintendo Co gained 2.5 per cent after mobile developer Colopl Inc said it will release its 'Shoironeko Project' game for Nintendo Switch from 2020.

Colopl rose 2.6 per cent, after jumping as much as 11 per cent.

Nintendo said in January that it filed a lawsuit against Colopl last December regarding infringements of patents.

The lawsuit, which is asking for 4.4 billion yen in damages from Colopl, claims among other things that the game 'Shironeko Project" infringes upon Nintendo's patents in terms of the game's touchscreen controls.

"Colopl's announcement triggered speculation that the two companies will settle the ongoing lawsuit," said Makoto Kikuchi, chief executive of Myojo Asset Management.